European leaders meet on whether to rescue Greece or cut it loose

July 1310:572015

The leaders of the 19 nations that use the euro debated Sunday whether to rescue Greece from the brink of financial ruin or cut the country loose from the currency bloc and let it fend for itself. The meeting follows marathon talks by European finance ministers on whether to approve a third bailout for Greece. At issue is whether Greece has taken adequate steps to cut spending and raise taxes to deserve the new three-year, $59 billion infusion of funds it has requested, and whether it can be trusted to follow through on the austerity program it has proposed as the price for new loans.

French President Francois Hollande, who wants to keep Greece in the eurozone, said as the leaders convened that France would do all it can to reach an agreement Sunday and keep the continent united. “It is Europe that is at stake,” he said. But in a sign of the division among the leaders deciding Greece’s fate, German Chancellor Angela Merkel said the talks will be “tough” and she ruled out “agreement at any price.” “The most important currency has been lost — and that is trust,” said Merkel, who has been skeptical of giving Greece a new loan on top of $240 billion the country already has received since 2010. Greece, which has been in a prolonged slump, has been unable to make a payment recently due on that debt.

One idea floated by Germany is to force Greece out of the eurozone for several years until it takes more action to get its financial house in order. That would require it to return to the drachma currency. Greece’s government opposes that step. Following the meeting of finance ministers, Finnish Finance Minister Alexander Stubbs said the group “made a lot of progress and were able to draft, I think, a very ambitious proposal and report for the heads of state and government.” “I think it’s a document that has far-reaching conditionality on three accounts,” he said — (Greek) laws that have to be pushed through by July 15, tough conditions on labor reforms, pensions, value added tax and taxes, and tough measures on privatization and privatization funds.

“The bottom line is that if there is to be an opening of ESM (European Stability Mechanism) negotiations, all of these conditions have to be met and approved by both the Greek government and the parliament,” he said. The ESM — an EU agency that provides financial help — needs 85% of votes from member countries to approve a bailout.